I have been trying to get a good looking shaded relief model out of GRASS and Qgis for a day or so now and just can't seem to get it. The biggest problem I'm having is the valleys look like mountains, but I just can't seem to get the right combination in order to show mountains and valleys look right.

Bellow is a some pictures of the problems:

DEM(Brown is high and Red is low, red is only used for a visual check)

Glad it worked better now. Note that there are several predefined terrain/elevation colour tables available which you can choose from; furthermore you can define easily your own.
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markusNDec 5 '10 at 15:43

Nathan, I've included an additional link in my response you may find helpful, cheers.
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scwDec 6 '10 at 21:04

I did use r.shaded.relief also with the defaults and to me it looked worse then the ones I posted. When I get to work on Monday I will post a screenshot and see what people think. Thanks for the r,colors table link, didn't know about that page.
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Nathan WNov 27 '10 at 1:50

I dunno if my example above looks bad (for me it is nice), at least it shows the default settings and no special tricks.
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markusNNov 27 '10 at 9:10

I think it looks good to me too. Maybe the colors in my first one [using the default settings] that I did was wrong.
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Nathan WNov 28 '10 at 4:10

There's nothing wrong with this hillshading and the coloring certainly is not the problem. We are experiencing a common, well-known phenomenon: our visual processing inverts depth and height when the terrain appears to be illuminated from below. (Look at the image again while standing on your head: it will appear correct.) That's why it's best to place the light near the top (map "north"). A close look at these particular images suggests the sun directions are not what you think they are: the top one seems to be illuminated from the right, not the bottom; and the bottom one seems to be illuminated from the lower right, not the upper left. Adding or subtracting 180 degrees from either of the angles will solve the problem. If the results are usually surprising to you, suspect one or more of the following:

The software might be using radians instead of degrees.

The angle might be measured counterclockwise from due east (the math/physics convention).

On first glance, it seems like the color ramping used is what makes the data look particularly confusing, choosing an appropriate hypsometric tint would make the differences more obvious. You may also want to look at other pre-generated shaded relief datasets for comparison, such as this SRTM-based one.

Another thing that would likely help is to add a stream centerline in an obvious water color, this will make unambiguous which areas are low-lying on the map and prevent the optical trick which makes the river appear as a ridgeline.